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Capital Group, sponsor of American Funds, wins 401(k) lawsuit

By Greg Iacurci
· January 26, 2018 4:07 pm · Updated 9:09 am

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Capital Group, which sponsors the American Funds brand of investment products, has won a lawsuit alleging the company profited at the expense of its employees by loading its 401(k) plan with costly in-house funds.

The decision was sure to be welcome news to other financial services companies, which have had to defend against an onslaught of similar excessive-fee lawsuits within the past few years but haven't seen much success.

Plaintiffs in the Capital Group case alleged that more than 90% of the plan's investment options were "unduly expensive" proprietary investments, and that the company could have used a less costly share class of funds, according to the ruling.

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U.S. District Judge Dale S. Fischer disagreed, saying the allegations "are not sufficiently plausible to survive a motion to dismiss."

"Unquestionably, fiduciaries need not choose the cheapest fees available to the exclusion of other considerations," the judge wrote in the ruling Tuesday.

Tom Joyce, a Capital Group spokesman, said the company is "pleased with the judge's order, and agrees with the ruling."

Attorneys at the law firm Keller Rohrback, which represented plaintiffs, didn't respond to a request for comment by press time.

The judge said plaintiffs may file an amended complaint for consideration by Feb. 20.

The Capital Group case — D'Ann M. Patterson vs. The Capital Group Companies Inc. et al. — was filed in June 2017 and comes as litigation over excessive retirement plan fees has expanded even beyond financial services companies and large private-sector employers to universities, unions, small employers and advisers.